Friday, 13 May 2016

Price vs. Value: Are They Different?

When it comes time to buy your home, what's one of the first things you need to do? You need to find out how much you can spend. So now you know what PRICE you can afford. But what about determining the VALUE you get for that price? Are they the same thing?

They are, most certainly, connected; but they are NOT the same thing. Price is objective. It's a number. In the case of real estate, it's a number realized after the sale is complete. It is the exact dollar amount that was paid for the specific property. In theory, it should be (roughly) the cost of the materials involved in the building of the home, plus any other buildings, plus the cost of the land. But, in real estate, that's not all that goes into it. Due to factors such as location, or family needs, among others, different people are willing to pay (potentially) vastly different amounts for the same home. That's where VALUE comes in. Value is very subjective. Different items have different value to different buyers.

As an example, let's pretend you're looking to buy a home, and you really want to be within walking distance to your workplace. You find two homes, identical in all aspects, except that one is a 5 minute walk to work, the other a 35 minute walk. You likely wouldn't be willing to pay the same for the 35 minute walk as you would for the 5 minute walk. Because the closer one is of more VALUE to you.

The difference between price and value can also effect you when you sell real estate. It's time to do some renovations to make your home more "saleable".

But what do you do, and how much do you spend? It becomes a question of balance. Of working the averages. What appeals to MOST buyers, to the widest market. But what about specialty items, like pools? Don't they add value to a property? In theory, yes. But if you spend $50,000 on a pool, it likely doesn't add that much in VALUE, as people looking for a home with a pool may not like the shape you chose, or the size, or the features. Not to mention that you are limiting your buying market, as not everyone looking in your area may want a pool at all. Which isn't to say don't build a pool. If you want one, go for it. But don't do it solely for resale.
So, when it comes to either buying, or selling, your home, enlist the help of a professional that will sit down with you, look at not only your budget, but also at which items and factors are of the most value to you, and then help you find the property that fits. Or in the case of selling, what makes the most sense, to appeal to the most buyers, when making changes. Because it's not just about cost.